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Followings are the auditor's calculations of several key ratios for Cragston Star Products and industry it belongs to for the recent 3 years. The primary

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Followings are the auditor's calculations of several key ratios for Cragston Star Products and industry it belongs to for the recent 3 years. The primary purpose of this information is to understand the client's business and assess the risk of material misstatements in the financial statements, but any other relevant conclusions are also desirable. Ratio 2015 Cragston Industry 2014 Cragaton Industry 2013 Crazstam Indrastry Current ratio 2.08 3.05 2.26 3.22 3.53 uid ratio 2.06 1.32 counts receivable turnover 5.80 5.50 5.81 6.10 5.76 to collect receivables 36.9 62 93 66.36 62.82 59.84 63.37 tory turnover 2.03 3.36 2.68 3.35 3.34 3.36 sell inventory 179.80 108.63 136.19 108.96 109.28 108.63 margin 0.13 0.20 0.16 0.19 0.19 0.21 0.09 0.16 0.12 0.18 0.15 0.17 Required: a. What major conclusions can be drawn from this information about the com Future? Hint: you can analyze from the perspective of financial performance, at pay its bills, liquidity ratios, along the two dimensions: trends for the compa comparison between entity data and industry data. Required: b. Based on the preceding ratios, which aspects of the company do you believe receive special emphasis in the audit? Required: c. Try to explain what kind of audit evidence the auditor can use to reduce the high assessed audit risk respectively identified in (b) You are an audit staff senior and you are going to assign the task to perform tests of controls for sales and collection and tests of details of balances for accounts receivable for the three engagements to your audit junior. You would like to form an expectation on the time required for these simultaneous engagements for the audit junior. The three clients are described below: Company 1- Al&Bee is a medium-sized retailer selling luxury handbags and accessory items. Its headquarter is in Singapore. During this year, Al&Bee started expanding its business and established a number of shops in various Asia Pacific countries including Taiwan and Hong Kong. Al&Bee has been a client of the audit firm for 5 years. based on the previous audit results, there have been a few internal controls in place and there have been some audit adjustments suggested by the auditor very year. Al&Bee adjusted its accounting records accordingly. Although Al&Bee has expanded its business during the year, its sales have not increased as much as expected, partly attributable to the slow down of economies in the region. Company 2- Co&Dan operates a chain of supermarkets in Singapore and is having its shares listed on the stock exchange. Co&Dan has been a client of the audit firm for 20 years and have implemented sophisticated internal control for its sales and collection cycle, including automated point of sale system at the cashier 10 years ago. Majority of its sales are made in either cash or credit cards, there has been seldom audit adjustment based on prior years' experience. Its sales have grown at a reasonable rate throughout the past few years and its performance is not materially affected by the economic slowdown as Co&Dan sells necessity items. Company 3- El&Fan, same as Al&Bee, is a medium-sized retailer selling handbags and accessory items. El&Fan is a family-owned company and it is a new client to the audit firm. Based on the preliminary understanding of the internal control of El&Fan, it is noted that there has been much segregation of duties within the company due to limited manpower. . Required: Devise an evidence mix for the audit of sales and collection cycle for the three clients above with respect to tests of controls, substantive tests of transactions, substantive analytical procedures and tests of details of balances. Justify whether extensive amount (E), medium amount (M), small amount of testing (S) or no testing (N) is expected and write down your explanations. Followings are the auditor's calculations of several key ratios for Cragston Star Products and industry it belongs to for the recent 3 years. The primary purpose of this information is to understand the client's business and assess the risk of material misstatements in the financial statements, but any other relevant conclusions are also desirable. Ratio 2015 2014 Cragston Industry Cragaton Industry 2013 Cragston Current ratio 3.53 Quick ratio 1.82 Accounts receivable turnover 5.30 5.81 6.10 5.76 Days to collect receivables 62.93 66.36 62.82 63 37 Inventory turnover 3.36 2.68 Days to sell inventory 179.80 108.63 136.19 109.28 108.63 Profit margin 0.13 0.20 0.16 0.19 0.19 0.21 Return on assets 0.09 0.16 0.12 0.1801 0.17 Required: b. Based on the preceding ratios, which aspects of the company do you believe should receive special emphasis in the audit? quired: Try to explain what kind of audit evidence the auditor can use to reduce the high essed audit risk respectively identified in (b). Followings are the auditor's calculations of several key ratios for Cragston Star Products and industry it belongs to for the recent 3 years. The primary purpose of this information is to understand the client's business and assess the risk of material misstatements in the financial statements, but any other relevant conclusions are also desirable. Ratio 2015 Cragston Industry 2014 Cragaton Industry 2013 Crazstam Indrastry Current ratio 2.08 3.05 2.26 3.22 3.53 uid ratio 2.06 1.32 counts receivable turnover 5.80 5.50 5.81 6.10 5.76 to collect receivables 36.9 62 93 66.36 62.82 59.84 63.37 tory turnover 2.03 3.36 2.68 3.35 3.34 3.36 sell inventory 179.80 108.63 136.19 108.96 109.28 108.63 margin 0.13 0.20 0.16 0.19 0.19 0.21 0.09 0.16 0.12 0.18 0.15 0.17 Required: a. What major conclusions can be drawn from this information about the com Future? Hint: you can analyze from the perspective of financial performance, at pay its bills, liquidity ratios, along the two dimensions: trends for the compa comparison between entity data and industry data. Required: b. Based on the preceding ratios, which aspects of the company do you believe receive special emphasis in the audit? Required: c. Try to explain what kind of audit evidence the auditor can use to reduce the high assessed audit risk respectively identified in (b) You are an audit staff senior and you are going to assign the task to perform tests of controls for sales and collection and tests of details of balances for accounts receivable for the three engagements to your audit junior. You would like to form an expectation on the time required for these simultaneous engagements for the audit junior. The three clients are described below: Company 1- Al&Bee is a medium-sized retailer selling luxury handbags and accessory items. Its headquarter is in Singapore. During this year, Al&Bee started expanding its business and established a number of shops in various Asia Pacific countries including Taiwan and Hong Kong. Al&Bee has been a client of the audit firm for 5 years. based on the previous audit results, there have been a few internal controls in place and there have been some audit adjustments suggested by the auditor very year. Al&Bee adjusted its accounting records accordingly. Although Al&Bee has expanded its business during the year, its sales have not increased as much as expected, partly attributable to the slow down of economies in the region. Company 2- Co&Dan operates a chain of supermarkets in Singapore and is having its shares listed on the stock exchange. Co&Dan has been a client of the audit firm for 20 years and have implemented sophisticated internal control for its sales and collection cycle, including automated point of sale system at the cashier 10 years ago. Majority of its sales are made in either cash or credit cards, there has been seldom audit adjustment based on prior years' experience. Its sales have grown at a reasonable rate throughout the past few years and its performance is not materially affected by the economic slowdown as Co&Dan sells necessity items. Company 3- El&Fan, same as Al&Bee, is a medium-sized retailer selling handbags and accessory items. El&Fan is a family-owned company and it is a new client to the audit firm. Based on the preliminary understanding of the internal control of El&Fan, it is noted that there has been much segregation of duties within the company due to limited manpower. . Required: Devise an evidence mix for the audit of sales and collection cycle for the three clients above with respect to tests of controls, substantive tests of transactions, substantive analytical procedures and tests of details of balances. Justify whether extensive amount (E), medium amount (M), small amount of testing (S) or no testing (N) is expected and write down your explanations. Followings are the auditor's calculations of several key ratios for Cragston Star Products and industry it belongs to for the recent 3 years. The primary purpose of this information is to understand the client's business and assess the risk of material misstatements in the financial statements, but any other relevant conclusions are also desirable. Ratio 2015 2014 Cragston Industry Cragaton Industry 2013 Cragston Current ratio 3.53 Quick ratio 1.82 Accounts receivable turnover 5.30 5.81 6.10 5.76 Days to collect receivables 62.93 66.36 62.82 63 37 Inventory turnover 3.36 2.68 Days to sell inventory 179.80 108.63 136.19 109.28 108.63 Profit margin 0.13 0.20 0.16 0.19 0.19 0.21 Return on assets 0.09 0.16 0.12 0.1801 0.17 Required: b. Based on the preceding ratios, which aspects of the company do you believe should receive special emphasis in the audit? quired: Try to explain what kind of audit evidence the auditor can use to reduce the high essed audit risk respectively identified in (b)

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